A taxpayer that operates a poultry processing plant in Alabama was not entitled to a refund of sales and use tax paid on purchases of antimicrobial agents since it failed to prove that the purchases were non-taxable as a “wholesale sale.” In its appeal, the taxpayer argued that the sales by vendors to the taxpayer of antimicrobial agents qualified as wholesale sales.
Referencing the Alabama tax code definition of a “wholesale sale,” the taxpayer argued that the antimicrobials “enter into and become an ingredient or component part of the tangible personal property or products which the manufacturer or compounder manufactures or compounds for sale.” However, the tax code definition of “wholesale sale” goes on to state that “…no sale of capital equipment, machinery, tools, or product shall be included in the term ‘wholesale sale.’ The term ‘capital equipment, machinery, tools, or product’ shall mean property that is subject to depreciation allowances for Alabama income tax purposes.”
The taxpayer did not present evidence concerning whether the antimicrobials were “subject to depreciation allowances for Alabama income tax purposes.” Since the taxpayer did not provide any evidence to prove one of the elements of the definition of “wholesale sale,” the Tax Tribunal found that the taxpayer did not prove that the purchases of antimicrobials were non-taxable. The Tax Tribunal stated that this negated the need for a discussion of whether the antimicrobials became an ingredient or component part of the products offered for sale.
The Department of Revenue did concede that the purchases of antimicrobials were subject to the state’s reduced machine tax rate. As a result, the taxpayer was entitled to a refund of such amount.
(Koch Foods of Alabama, LLC v. Alabama Department of Revenue, Alabama Tax Tribunal, Nos. S. 21-1112-JP, CITY 21-103-JP, COUNTY 21-105-JP, February 27, 2023)